A new voice joins the China debate

‘Simplistically, as a layman, China has been a better friend to us than we have been to China,’ says James Packer. ‘Now I think that if that continues for long periods of time, friendships get damaged.’
Photo: Louie Douvis

Dennis Richardson
is an unusual bureaucrat in that he tends to speak his mind publicly in ways that recall another era of Australian public service – before successive governments imposed constraints on its servants that required them to remain relatively invisible.

Think of Arthur Tange in an earlier period on defence issues, or
HC “Nugget" Coombs
on indigenous policy or John Crawford on public administration and finance, all of whom would engage in the public debate in ways that were controversial in their time.

So it was this past week that Richardson waded into the public debate on the most vexed foreign policy issue facing Australia: how to balance relations with China and the United States.

In doing so, he took aim at two of Australia’s most powerful business figures, who had seemingly advanced the proposition at a China conference a week earlier that commercial imperatives should somehow be indistinguishable from the national interest.

At least that is how it sounded, even if Messrs
Kerry Stokes
and
James Packer
would not put it quite that way.

This prompted a sharp response from the man who is arguably Australia’s most senior public servant following his shift at the age of 65 from secretary of the Department of Foreign Affairs and Trade to Defence, under a five-year contract.

“We read a lot about Australia, China and the United States,’’ Richardson said in his Michael Hintze Lecture at Sydney University.

“In Australia it is not uncommon to see discussion about the implications of the rise of China for our relationship with the United States. This often comes down to a discussion about the need for Australia to make a choice between our strategic relationship with the United States and our economic relationship with China.’’

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And then came the nub of his Hintze lecture that was clearly aimed at Stokes and Packer, both of whom have extensive Chinese commercial interests: Stokes has the second largest Caterpillar dealership in the world located in China’s northern mining tier and Packer has expanding gambling interests in Macau.

“I believe much of the discussion is simplistic and overstated,’’ Richardson said. “Our alliance with the United States is not up for sale. Since when does any country worth its salt auction its alliance to the highest bidder?’’

What appears to have drawn Richardson’s ire particularly is Stokes’s criticism of the government’s decision to allow US marines to transition through Darwin, thereby affronting Australia’s neighbours, including China. (A close Stokes associate told the Weekend Financial Review his reservations were more to do with his objections to US troops on Australian soil and not under Australian command than to actual transitional arrangements.)

Whatever the case, Richardson’s intervention is part of a useful breakout debate on getting the balance right between Australia’s commercial and security interests, coinciding as it does with the soon-to-be-released white paper on the Asian century that will serve a blueprint for ties with the region.

The white paper is being marketed as the most significant contribution to establishing a framework for Australia’s relations with Asia since
Ross Garnaut
’s groundbreaking Australia and the Northeast Asian Ascendancy of the late 1980s that acknowledged China’s rise.

Treasurer
Wayne Swan
provided a foretaste of what will be included in the Asian century white paper in telling the China conference – at which Stokes and Packer also appeared – of a “five policy pillars’’ plan for Australia’s engagement.

These would include education and skills, innovation, infrastructure, tax reform and regulation as part of what he described as “a set of ambitious policy objectives for Australia to achieve by 2025, some of which will be implemented immediately and some that will unfold over many years’’.

Encouragingly, reforms will not simply describe how Australia engages with the region externally, but what might be done domestically to improve the business environment to enable more effective interaction through tax, regulatory and other reforms.

Swan added that opportunities in the region would “require Australia to forge deeper and broader relationships with our neighbours at all levels – not only through commercial and political links but through social and cultural links as well".

This might be regarded as “bureaucratic speak’’, but what Swan is talking about is a more concerted whole-of-government focus on building relationships more or less across the board, in recognition of the complexities of a region in wrenching transition.

It might be surprising – given all that has happened in the past 40 years since prime minister
Gough Whitlam
“normalised’’ relations with China as one of the first acts of the new Labor government – that Australia appears not to have systems and frameworks in place to sustain regional relationships.

This suggests a complacency that will, it is hoped, be addressed by the Asian century white paper. Australian business, which has surfed a commodities boom, has itself been inattentive.

Contributions to the debate about how to maximise the benefits of an Asian century from Stokes, Packer and
Andrew Forrest
of Fortescue Metals are part of a ferment generated by a realisation that much more could – and should – be done to nurture Asian partnerships.

Indeed, Richardson in the Hintze lecture alluded to this through his references specifically to the depth and breadth of the China relationship.

“Australia and China have extensive bilateral machinery involving over 30 forums covering both government and the private sector,’’ he noted. “The overarching machinery, however, remains underdone. That is something we are aware of and are seeking to remedy over time.’’

Richardson’s contribution on that front will be welcome and accords with business’s concerns about lack of focus on making the best of opportunities.

John Denton
, the chief executive of Corrs Chambers Westgarth and a member of the Asian century white paper review panel, believes what is needed is a framework for engagement to enable Australia to deal with the inevitable “ups and downs’’ and “jolts and shudders’’ that will accompany developments of a region in raw transition.

Denton tells the Weekend Financial Review that what the Asian Century white paper will set out to achieve as far as China is concerned is the sort of the relationship that has prevailed with Japan since the 1950s, when that post-World War II trading partnership began to take shape.

“What is required is for the white paper to come up with a comprehensive economic framework built on the same principles as our relationship with Japan that is both multi-layered and multi-textured,’’ he said.

Denton predicts the Asian century document will “set a new benchmark for relations with the region". We shall see.

Australia’s former ambassador to China, Geoff Raby, now a China consultant and board member of Forrest’s Fortescue Metals, among other companies, has been forthright in his criticism of what he perceives to be Australia’s lack of even-handedness in dealing with new strategic realities in the region.

Speaking to the Weekend Financial Review this past week from Hefei, the capital of Anhui province, Raby said there needed to be “much more active engagement with China from the head of government down".

He noted that, in her time in office since mid-2010,
Julia Gillard
had spent just 48 hours in China – in contrast with others, such as German Chancellor
Angela Merkel
, who have been more regular visitors.

“It’s important we commit additional time resources, including establishing a high-level business dialogue,’’ Raby said.

The Weekend Financial Review understands this will be an outcome of the Asian century review.

“This [China] is a political economy,’’ he says on the phone from Beijing. “We can’t do too much.’’

Smith makes the observation the Chinese themselves are “bemused’’ with Australia’s breakout debate about getting the balance right between the country’s commercial and strategic interests.

Beijing will not necessarily be overanalysing the debate; rather, in typically pragmatic fashion, it will be assessing ways in which it might take advantage of disagreements over how Australia balances relations between its biggest trading partner and cornerstone security ally.

China professionals inside and outside the Australian bureaucracy have, for the most part, welcomed Richardson’s statement as a caution against allowing Beijing to imagine that an influential constituency exist there that would simply acquiesce to whatever designs it might have in mind in the region.

“We should not lead them [the Chinese] to believe that we will simply kiss the ground on which they tread and let them drive over us as well,’’ was how one seasoned China hand put it.

On the other hand, there are risks involved in the Richardson view if it constrains what is required – which is a much broader engagement with China and the region and in which business and government each play their part.